Social Surplus = Consumer Surplus + Producer Surplus + Bystanders Surplus
Tabarrok notes that social surplus is “ultimately what we care about” because “we care about not just consumers and producers, we care about everyone.” The problem is that when there are significant external costs or benefits the market will not maximize social surplus.
Atlas topic, subject, and course
Alex Tabarrok, minute 5:56 – 6:20 of An Introduction to Externalities (12-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/externalities-definition-pigovian-tax, accessed 6 May 2016.
Page created by: Ian Clark, last modified 6 May 2016.